Our practical suggestion is to consider strategic planning and tackle profitability issues before buying. If you begin with a clear end goal, you are less likely to face financial troubles from over-improving.
Plan for the long-term
It’s often suggested by experts to start with an exit strategy for your investment. You need to ensure that you can refinance or sell an investment property at the right time and make a profit. If not, what’s the point of making the purchase?
Speak with a few lenders to understand mortgage products, costs, and if your goals match your financial situation. A knowledgeable lender should inform you of possible obstacles and verify the soundness of your strategy.
Calculate property value after repair
A key piece of information to prevent over-improving your Ballantyne rental property is knowing its After-Repaired Value (ARV). ARV represents the estimated value of the property post-repair or renovation. To guarantee a profitable investment, you need to know the house’s value after improvements.
Calculate your ARV with accurate comparable properties. Following that, talk to real estate agents, other investors, and your contractor. The more data you collect, the more confident you’ll be that your improvements are sufficient—but not over-the-top.
Balancing improvements can be challenging, especially for those new to investing. However, you can use comparables—similar properties recently sold or rented in the same area—to guide your improvement decisions. Knowing the local rental market helps you upgrade your property to achieve competitive market rents.
Don’t go overboard with improvements
One of the biggest mistakes you can make is to upgrade your property beyond the neighborhood standard. If tile floors and composite countertops are common in the neighborhood, avoid installing hardwood and granite.
While it’s important for upgrades to be good quality, luxury materials and high-end products are often not worth the cost. Go for mid-grade materials that provide decent quality without the high cost or luxury. Even in upscale neighborhoods, choose mid-grade materials and make nice but not extravagant upgrades.
Prioritize profitability over personal preference
Finally, ensure you don’t over-improve your rental by not getting too emotionally attached. Treat it as an investment rather than your own home. When you’re emotionally involved in your rental properties, you might make renovations you like but that don’t enhance profitability much. It’s normal to want pride in your rental properties, but it should stem from having a profitable, well-run investment, not from excessive spending on improvements.
Interested in expert advice to optimize your rental property profits? Real Property Management Queen City can help. We’re a team of experienced property managers in Ballantyne and nearby. Contact us online or call us at 980-392-4048 to learn more.